All decisions concerning the allocation of environmental resources imply the valuation of those resources. Ecological economics does not eschew valuation. It is recognized that the decisions we make, as a society, about ecosystems imply a valuation of those systems. We can choose to make these valuations explicit or not; we can undertake them using the best available ecological science and understanding or not; we can do them with an explicit acknowledgment of the huge uncertainties involved or not; but as long as we are forced to make choices about the use of resources we are valuing those resources. These values will reflect differences in the underlying worldview and culture of which we are a part, just as they will reflect differences in preferences, technology, assets, and income. An ecological economics approach to valuation implies an assessment of the spatial and temporal dynamics of ecosystem services, and their role in satisfying both individual and social preferences. It also implies explicit treatment of the uncertainties associated with tracking these dynamics.
Ecological economics is different from environmental economics in terms of the latitude of approaches to the ecosystem valuation problem it allows. They include more conventional Willingness To Pay (WTP)-based approaches, but they also explore other more novel methods based on explicitly modeling the linkages between ecosystems and economic systems in the long run respectively.
Preference formation is influenced by limited information in estimating WTP-based values for biodiversity preservation. Empirical studies show that a significant portion of individuals exhibit 'lexicographic' preferences, that is, they refuse to make tradeoffs that require the substitution of biodiversity for other goods. This places significant constraints on the use of stated preferences, as used in contingent valuation studies, for valuation of ecosystem services and decision-making. It places more emphasis on the need to develop more direct methods to assess the value of these resources as a supplement to conventional WTP-based methods.
The valuation ofecological resources requires a deeper understanding of the ways in which economic activity depends on biogeophysical processes than is usually recognized. However, the issue of ecosystem valuation is far from solved. In fact, it is probably only in the early stages of development. Conventional WTP-based approaches have severe limitations. Key directions for the future include integrated ecological economic modeling, as elaborated in the next section.
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